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The cost of debt is equal to one minus the marginal tax rate multiplied by the average coupon rate on all outstanding debt. True False
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The cost of debt is equal to one minus the marginal tax rate multiplied by the average coupon rate on all outstanding debt. True False

User Are Almaas
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1 Answer

3 votes

Answer:

False

Step-by-step explanation:

False, The given information is false because coupon rate is not required while calculating the cost of the debt. Only interest rate which is also called Yield to maturity and the marginal tax rate is needed to calculate the cost of debt.

Below is the formula:

Cost of debt after the tax = Interest rate (1 - Marginal tax rate)

User Scott Thomson
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